Tuesday, June 9, 2009

Collectible Costs and realted matters

We often get requests to pass on management company charges in collection actions; while I am sympathetic to the costs that are incurred, this email with the names modified to protect the guilty sums up the position on the issue quite well...

Hi Jennifer;

Jenny asked me to respond to the inquiry you had regarding the issue of informing you that we cannot collect the $10 per month collection "fee" that #$@&^!@ Management imposes on delinquent accounts. The following is why.

The law says this:


(3) Assessments and installments on assessments that are not paid when due bear interest from the due date until paid at the rate provided in the declaration of covenants or the bylaws of the association, which rate may not exceed the rate allowed by law. If no rate is provided in the declaration or bylaws, interest accrues at the rate of 18 percent per year.

(a) If the declaration or bylaws so provide, the association may also charge an administrative late fee in an amount not to exceed the greater of $25 or 5 percent of the amount of each installment that is paid past the due date.

(b) Any payment received by an association and accepted shall be applied first to any interest accrued, then to any administrative late fee, then to any costs and reasonable attorney's fees incurred in collection, and then to the delinquent assessment. This paragraph applies notwithstanding any restrictive endorsement, designation, or instruction placed on or accompanying a payment. A late fee is not subject to the provisions of chapter 687 and is not a fine.

The question then becomes what is a "cost"? I think the Legislature has given us some guidance in section 720.3085 (4) Fl Stat. which says:

(a) Provide the owner with 45 days following the date the notice is deposited in the mail to make payment for all amounts due, including, but not limited to, any attorney's fees and actual costs associated with the preparation and delivery of the written demand.

So here we have the same statute referring to "costs" and "actual costs" and not defining either of them.

For guidance we need to turn to the language of the Fair Debt Collections Practices Act, which states as follows (remember attorneys are "Debt Collectors" as defined in the Act, so this limits us):

§ 1692f. Unfair practices

A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.

The instrument creating the debt is between %$#@&*! management (or management company and the Association; the debtor is not a party to that obligation. Therefore the amount is only collectible if it is allowed by state law.

"Costs" as they are generally referred to are subject to the Uniform Guidelines as to Cost Awards, promulgated by The Supreme Court. As you can see, very few "costs" that we may consider as being recoverable, such as photocopies, are actually recoverable. In my opinion, the distinction between the reference to "costs" and "actual costs" is crucial. An "actual cost" is a cost imposed in connection with preparation and dissemination of the initial 45 day letter as set forth above. That is a cost we already protect.

However any other charges imposed over and above that which is allowed by state law (as the "actual costs" are) and not part of the agreement between the debtor and creditor are NOT recoverable and subject at least my law firm to an action for violation of the fair Debt Collections Practices Act.

Hope this helps, Bob Tankel

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